Consumer Safety & Awareness Part 25

Identity Theft Insurance

One of the most misleading, overpriced services available to consumers is insurance for identity theft. Several companies offer them, and they are certainly not worth it. They do nothing to repair your credit, only provide financial insurance in case someone steals your financial information. You are generally covered by your credit card companies and bank accounts, so additional insurance is not needed.

In the case of identity theft, the problem is not so much financial loss as it time of recovery. It may take months to convince the banks and credit card companies to release your account back to you, and whether you are insured or not, your credit rating will suffer. Go to the web sites of these companies and you’ll see comparison charts. Like automotive commercials comparing one car to another, each insurance company only lists the features in which they will be superior. If they do not match up to other companies their chart will not include that item. Thus they look good, no matter what quality of service they provide.

Privacy Rights Clearinghouse, often quoted by not only these insurance companies but others in the field, states:

“Generally, credit monitoring services cannot protect against the five kinds of fraud which we will describe below. Some more comprehensive services may be able to provide limited protection against these other types of fraud. Generally, services that claim to provide more comprehensive protection monitor online chat rooms, blogs, and news sources to look for evidence of criminal activity. However, there is no assurance that a particular fraudulent activity will become the subject of an online discussion. The ability of such enhanced services to protect you from fraud is as yet unproven. Clearly there is a tremendous amount of fraudulent activity that does not get discussed online.

In our opinion, most identity theft monitoring services are unable to provide anything close to complete protection for the following kinds of unlawful activity:

a) Existing account fraud occurs when an imposter uses your current accounts to commit fraud. For example, an imposter could use your credit card account number to make a purchase from an online vendor, or your bank account number to make a withdrawal. This is also referred to as “account takeover” fraud. You generally learn of such fraud by carefully reviewing your monthly account statements.

b) Debit or check card fraud occurs when an imposter uses your debit card or check card (or the information from your card) to remove money from your bank account. The imposter does not need to know your PIN because he or she will be able to use the card for an “off-line transaction.”

c) Social Security number fraud occurs when an imposter uses your SSN to obtain employment, for tax reporting purposes, or for other illegal transactions. For example, an undocumented worker might use your Social Security number to obtain employment or an imposter might use your SSN to avoid paying taxes on their income.

d) Criminal identity theft occurs when an imposter gives another person's name and personal information (or counterfeit documents) to a law enforcement officer during an arrest. Frequently, the imposter fraudulently obtained a driver's license in the victim's name and provides that identification document to law enforcement. Or the imposter, without showing any photo identification, uses the name of a friend or relative.

In many cases, the imposter is cited for a traffic violation or for a misdemeanor violation and is immediately released from the arrest. If the imposter then does not appear in court at the appointed date, a warrant of arrest will be issued under the victim's name. If at a later date the victim is stopped for, say, a traffic violation, he or she may be arrested because of the outstanding bench warrant.

e) Identity theft involving one’s health information (medical identity theft) occurs when an imposter uses an individual’s name and/or other information (often insurance information) to obtain or make false claims for medical goods or services. Medical identity theft may result in erroneous entries being entered into an existing medical record, or the creation of fictitious medical records in the victim’s name.

This potentially can have fatal consequences for the victim. For example, in an emergency room setting, the victim may be unconscious at the time of treatment. If the victim’s medical record reflects the imposter’s blood type, allergies, medications, or other medical conditions, health care providers may make dangerous errors.


For detailed information about identity theft, how to minimize the likelihood of becoming a victim, and ways to fix such problems without paying for expensive insurance, visit the Privacy Rights Clearinghouse at http://www.privacyrights.org/fs/fs33-CreditMonitoring.htm